For years, Japan has regulated cryptoassets primarily as a means of payment and settlement. That approach reflected an earlier stage of the market, when crypto was largely viewed as a new way to transfer value. But as cryptoassets have increasingly become investment products, traded on sophisticated platforms and considered for mainstream financial products, Japan is now changing the way it regulates them.
On April 10, 2026, the Japanese government submitted a bill to amend the Financial Instruments and Exchange Act (FIEA) and the Payment Services Act. The legislation was subsequently passed by the National Diet on July 15. The reforms move cryptoassets more firmly into the FIEA framework, introducing rules covering areas such as business conduct, disclosure, investor protection and unfair trading.
The revised framework is expected to take effect during 2027. Separately, Japan is also moving toward a separate tax regime for certain cryptoasset transactions, bringing them closer to the 20% rate applied to other financial investments. The change is expected to apply from January 2028.
The significance of these reforms goes beyond changes to licensing or taxation. Japan is confronting a question that regulators around the world are increasingly facing: what role should crypto and tokenised assets play inside the existing financial system?
Rather than choosing between embracing crypto and protecting traditional finance, Japan appears to be pursuing a third approach. It is attempting to bring crypto into the regulated financial system, make it more investable, and ensure that its development remains compatible with Japan’s broader financial and monetary architecture.
From Payment Tool to Investment Asset
Previously, cryptoassets in Japan were regulated primarily under the Payment Services Act (PSA). The framework focused heavily on the safe exchange and custody of cryptoassets and their use in transactions. The FIEA, meanwhile, already covered certain cryptoasset derivatives and unfair trading matters, but spot crypto trading remained largely outside its main framework.
The new reforms change that architecture. Cryptoassets are now being positioned under the FIEA as a distinct category of financial instrument, with cryptoasset trading and related activities being brought closer to the standards that apply to other financial markets. The Financial System Council’s working group had recommended precisely this shift. Their recommendation included moving the governing law for cryptoassets from the PSA to the FIEA and subjecting cryptoasset businesses to rules comparable to those applying to Type I Financial Instruments Businesses. This is more than a change in legal classification. It reflects a change in regulatory philosophy.
The framework also distinguishes between different types of cryptoassets. For instance, “specified cryptoassets”, which can include tokens where a particular entity has a role in issuing or controlling them, are treated differently from assets such as Bitcoin where no specific issuer can easily be identified. This distinction is used to determine where disclosure responsibilities lie and what protections should apply.
In effect, Japan is beginning to regulate crypto according to the financial activity taking place around it.
Integrating Crypto Into the Financial System
The new framework raises standards expected of firms operating in the market. Existing cryptoasset exchange operators will move closer to the regulatory standards applied to Type I financial instruments businesses, with the new regime subjecting them to requirements around capital, contingency reserves, governance, and systems. New rules explicitly penalize insider trading, mandate strict annual disclosures for issuers, and increase crackdowns on unregistered foreign or domestic exchange operators.
Operators will also have greater responsibilities for assessing the cryptoassets they list, managing risks and overseeing external providers involved in cryptoasset management. Investment management and advisory services relating to cryptoassets are also being brought within the regulatory perimeter.
Some of these requirements respond to risks that are particularly relevant to crypto markets. A traditional financial institution can suffer from operational failures, but crypto platforms face an additional issue: assets can move almost instantly across digital networks, while a successful cyberattack can result in the irreversible loss of customer assets.
This means Japan is not simply transferring the rules for traditional financial products onto cryptoassets. Instead, it is using the FIEA as a regulatory baseline and adding safeguards where crypto creates risks that traditional financial markets do not face in the same way. For example, the framework strengthens requirements around cybersecurity, the management of customer assets and the oversight of external technology and wallet providers. The result is a hybrid approach: crypto businesses are brought closer to the standards expected of mainstream financial institutions, while the rules are adapted where the underlying technology creates different risks.
Regulation as a Market-Building Tool
Another interesting facet of Japan’s approach is this: stronger regulation is being introduced alongside measures typically designed to make the market more attractive to investors. Its tax reform demonstrates this most clearly. The country has historically subjected cryptoasset trading to comprehensive taxation, with the combined income and resident tax burden reaching as high as 55%. The new reforms now subject income arising from certain crypto asset transactions to a fixed-rate separate taxation at the rate of 20.315%. The change is expected to take effect from January 2028, following the implementation of the amended FIEA framework.
Treating cryptoassets within the financial instruments framework also creates a more coherent legal foundation for the potential development of institutional products such as spot crypto exchange-traded funds. Japan has also indicated that certain cryptoasset-focused ETFs could become eligible for the new separate tax treatment, which could support the development of more sophisticated professional and derivatives markets.
The reforms create a trade-off: stronger disclosure, governance and market-conduct requirements can increase investor confidence, but they also increase the cost of operating in the market. Higher standards could make compliance so expensive that smaller firms and innovators struggle to participate.
Integrating Crypto and Tokenised Finance on Japanese Terms
Japan’s regulatory restructuring is also part of a broader question about how digital assets like tokenised deposits and securities and blockchain-based payment infrastructure can coexist with banks, capital markets and the monetary system. Its participation in Project Agorá, a BIS-led initiative on tokenised wholesale cross-border payments, provides an important example. The Bank of Japan is working with other central banks and private financial institutions to examine how tokenised commercial bank deposits and tokenised central bank reserves could operate together on a shared programmable platform.
This is significant because it shows that Japan’s interest in digital finance is not limited to privately issued cryptoassets. Japanese policymakers are also exploring how the technology behind tokenisation can improve parts of traditional finance itself. The two developments are therefore different, but they point towards a similar policy direction. On one side, Japan is bringing crypto markets closer to the existing financial regulatory system. On the other hand, it is exploring how tokenisation could modernise the infrastructure of that system.
Rather than allowing crypto and tokenised finance to develop as a parallel system outside traditional finance, Japan appears to be exploring how different forms of digital assets can be brought into, and made compatible with, the existing financial architecture.
This also connects Japan’s approach to a broader international trend. With growing interconnectedness between traditional finance and digital assets, regulators and standard-setting bodies are placing greater emphasis on the activities being performed and the risks being created, rather than treating crypto as an entirely separate category.
A Japanese Model for the Next Stage of Crypto Regulation
The success of Japan’s reforms will depend on two things: whether Japan can maintain the balance between regulation and market development, and whether it can effectively enforce the rules it has established. This is likely to be the next major challenge for regulators everywhere. As crypto markets operate across borders and can move rapidly between jurisdictions, having comprehensive rules is only one part of the regulatory task. The harder question is whether regulators can monitor activity, identify non-compliance and take effective action when firms or market participants operate beyond their immediate jurisdiction.
Whether Japan can shape the development of digital finance on its own terms therefore emerges as the penultimate question. As crypto, tokenisation and traditional finance increasingly converge, the regulatory challenge is moving beyond whether digital assets should be embraced or restricted. It is becoming a question of how they can be integrated into mainstream finance without compromising financial stability, while still preserving the innovation that distinguishes them from traditional financial products.